Financial and commodity markets analytics

gold's about to shine

Published on 23.01.2019 18:21

For the last 3 weeks the gold price has consolidated around the $1280 mark as hopes grew for a trade deal between the US and China which many thought would bring stability to the financial sector and leave little appetite to invest in the precious metal as a safe haven asset.

The hope of a trade deal is quickly fading though as both sides appear unwilling to give ground and hence the gold price is well supported at its current price and now investors are looking for the next big news to drive the price higher which may arrive next week

The US Federal Reserve is due to give their first monetary speech of the year and investors will pay close attention to the wording and whether the Fed plans to lift interest rates further this year which in most cases should be negative for gold.

If the Fed comes out with a bullish stance and signals they plan to continue with their rate hikes, gold will benefit as the likelihood the US will fall into a recession will increase.

On the other hand, if they take a dovish approach to moving rates higher, the US dollar is likely to suffer which is always a beneficial factor for gold.

One analyst claims that the US central bank was wrong towards the end of last year by announcing to the market there would be further rate hikes and now they will be forced to eat their words and correct the situation

“The stock market, crude oil, bonds, and President Trump all signaled that Fed Chairman Jerome Powell had made a grave mistake by indicating more rate increases to come in 2019,” said Joe Foster, portfolio manager and strategist for VanEck’s

“We also believe that the Fed made a serious mistake, but we think the blame should be placed on Mr. Powell’s predecessors, who waited far too long to normalize monetary policy. Now the Fed is tasked with normalizing rates late in the cycle, and it is rapidly running out of time.” He added.

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